Malaysia Property News is a free resource website sharing Daily Property News & information about Property in Malaysia, which related to, Property Market, Property Investment, Commercial Property , Hot Properties Malaysia, Real Estate, Retail Shop, Business Park, Condominium Malaysia, Terraces & Apartment Malaysia, Houses, Residence, Resort and many more.

Saturday, April 19, 2008

Strong demand for Signature systems

Overseas market provides impetus for growth

FROM the onset, kitchen and wardrobe furniture may seem hardly a business that would whet investor appetite. But even as the limelight has long shone on plantation and oil and gas, a niche performer in the “dull” sector and new entrant to the Bursa Malaysia's second board, Signature International Bhd has chalked up a compounded growth rate of 31% per year – indeed, an impressive feat.

Tan: Strong demand seen in India and Middle East

Signature is a locally established operator specialising in the design, manufacturing and retailing of kitchen and wardrobe systems under the brand names Signature Kitchen and Signature Wardrobe.

A general notion exists that the growth prospects of furniture-based companies are staid due to their reliance on organic growth.

But interior fit out firm LCL Corp Bhd has managed to defy that by successfully replicating its business model in the Middle East, particularly Dubai, largely due to its international designs at a fraction of the cost.

Similarly, so has Signature, which has built its own niche in high-end developments and overseas expansion.

Growth from overseas has been encouraging with a compounded rate of 229% per annum over the last three years. From an initial contribution of some 5% three years ago, the business with footprints in 14 markets now contributes about 12%.

Signature's managing director and co-founder KC Tan says that with the strong demand for properties especially in India and the Middle East, he expects the overseas contribution to continue growing by double-digit speed.

“In the Middle East, they are growing so fast that one doesn't feel the recession in the US. We are aiming to open our office in Dubai this year, and another in China next year. We expect these markets to be our major contributors moving forward,” says Tan.

Due to the diversity of Signature's earnings, a softening property market in one particular market may not necessarily affect Signature's bottomline.

“How we are able to grow so quickly is because we outsource all our high quantity but low value jobs, while we focus on our low volume but high value jobs. Hence we do not face capacity constraints and huge capital requirements. We are able to increase our capacity as and when a big project comes to us,” says Tan.

Two pronged
The group’s overall business focus is based on a two-prong approach in servicing a wide market spectrum, including the retail market and the project market, thus representing a comprehensive coverage of the total market. There are advantages to that approach as retail market provides premium pricing, while the project market gives the group the volume to achieve economies of scale.

The strategy appears to have worked well with Signature, which observers say commands a high brand equity, which also explains its ability to bag jobs from high-end developers in the country.

In February, the company secured its maiden contract worth RM16mil in Dubai for the Palm Jumeriah Marina Apartments.

Tan says that markets like India and the Middle East are facing a shortage of property developers and kitchen manufacturers (on the back of rapid development), hence the demand for foreign expertise.

“Our main advantage lies in our price. Currently, India and Middle East get the services of a European kitchen manufacturer. They are a lot more expensive by virtue of their currency. Cost wise, they cannot compete with us. We offer the same quality for a cheaper price,” he says.

Winning strategy
Back home, while Signature is the market leader in Malaysia's retail kitchen market, its foray into the developer project-based market has seen a huge earnings surge in the past three years.

“In Malaysia, we have consistent and steady growth from our retail segment. Right now, it is almost a 50-50 contribution from both the retail and project segment. While the retail will continue to provide a very strong base for us, our growth will come from the project developers segment,” says Tan.

Signature has been hired by reputable developers for high-end projects such as One KLCC's One KL, Putra Perdana's The Marc Residence, Ireka's Kiara1@I-Zen and Glomac's Suria Stonor.

In February, Signature filled its books with another RM31mil worth of jobs, notably The Avare Condominum and The Hampshire, which are located in the heart of Kuala Lumpur.

These Malaysian property developers continue to make inroads overseas to expand their earnings base and with that, Tan says he is hopeful that Signature stands a good chance of tagging along with these developers for their future projects.

To date, Signature has a total order book of RM93mil, out of which RM68.5mil are for the domestic market. It has an unbilled portion of more than RM80mil as of December 2007. These projects are enough to keep the company busy for the next two years.

Tan says that he is bidding for RM80mil worth of jobs locally, and 14 projects overseas with a value of more than RM50mil. Historically, Signature has had a 50% success rate when it bids.

To-date, the group has 22 retail showrooms operating under the Signature Kitchen brand name in Malaysia. Of these local retail showrooms, 7 are wholly owned whereas the remaining are managed and owned by appointed dealers.

Based on an independent survey conducted recently, Signature has the largest retail network of kitchen systems in Malaysia.

Signature also has 10 retail showrooms overseas and has successfully exported its kitchen systems to 15 countries, namely Thailand, Sri Lanka, India, Philippines, Maldives, Singapore, Bahrain, Brunei, Mauritius, Indonesia, Vietnam, Pakistan, Dominican Republic as well as Australia and New Zealand.

Signature was listed in January this year at an initial public offering price of RM1.25. It is currently trading at around RM1.03.

By The Star (by Tee Lin Say)

No comments: